|
To compete in today's information age, companies must revaluate the way they do business in the light of rapid, unrelenting changes in the marketplace. The need to improve productivity, quality, and flexibility has led companies to examine their organizational structures and realize that creating the greatest value does not require them to own, manage and directly control all their assets and resources. Rather, strategic alliances and partnership with those who provide expertise in a particular area may be the most efficient way to gain results.
Information
Technology (IT) outsourcing had been occurring for
decades but gained attention only during the 1990s
when firms began signing high-net worth agreements
for total or selective outsourcing, primarily to cut
cost or to concentrate on their core businesses. The
problems encountered in most internal IT departments,
with their mix of old and new machines and skills
and their traditional tendency to focus on technological
details rather than on business issues distracted
senior IT management. On the other hand, parallel
developments in the marketplace offered companies
an opportunity to trade ownership for results by providing
high-quality choices.
The
late 1990s also witnessed growth in telecommunications
and Internet technology making it possible to provide
services by sitting anywhere in the world. This led
to the growth of Business Process Outsourcing (BPO)
(see figure 1) which is delegation of one or more
IT intensive business processes (IT as well as non-IT
activities of a business process) to an external provider
who owns, administers and manages the selected processes,
based on defined and measurable performance metrics.
It is the outsourcing of non-core business processes
to the providers who have core competencies in the
business process and who have the latest technology
to provide it in a cost-effective manner along with
other benefits. |
